Australia’s tax system is on the verge of one of its most significant structural reforms in decades.

The Federal Government has introduced the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, alongside related income tax amendments, signalling major changes to how capital gains, property investment losses, and long-term asset structures will be treated.

If passed, this legislation will reshape how Australians invest in property, structure businesses, and plan long-term wealth strategies.

While media commentary has focused on extreme outcomes, the actual legislative impact is more structured and targeted than many headlines suggest.

This article breaks down what is changing, who is affected, and what it means for investors and business owners in practical terms.

What Happened?

The Government has formally introduced a suite of tax reform bills into Parliament that aim to modernise Australia’s capital gains tax system and adjust property investment incentives.

Key proposed changes include:

• Removal of the 50% CGT discount for future asset acquisitions
• Introduction of CPI-based cost base indexation
• Restrictions on negative gearing for established residential property
• Changes to the treatment of pre-1985 (pre-CGT) assets

The legislation is currently a Bill, meaning it is not yet law.

Why Does This Matter?

For the past 20+ years, Australian wealth creation strategies have heavily relied on:

• Long-term property investment
• Negative gearing to offset income
• The 50% CGT discount on asset sales

From 1 July 2027, this framework begins to shift for new investments.

This affects:

• Property investors
• Small business owners planning exits
• Family trusts and holding structures
• High-income professionals building investment portfolios

The biggest change is not just tax rates—it is the structure of how gains and losses are calculated.

What Are the Key Tax Changes?

1. Removal of the 50% CGT Discount (Future Assets)

Currently, individuals and trusts receive a 50% discount on capital gains for assets held over 12 months.

Under the proposed rules, this discount will be removed for future acquisitions and replaced with CPI-based indexation.

What indexation means

Instead of halving your gain, your original purchase price is adjusted for inflation before tax is applied.

This shifts taxation from “nominal gains” to “real gains”.

Important transition rule

For assets held before 1 July 2027:

• A deemed valuation at 30 June 2027 applies
• Gains are split into pre- and post-cutoff periods
• Different tax treatments apply to each portion

2. Minimum 30% Tax Rate on Capital Gains

A new floor rate ensures capital gains cannot be heavily reduced by timing income into low-tax years.

Once calculated, net capital gains will face a minimum 30% tax rate, regardless of income smoothing strategies.

3. Removal of Pre-1985 CGT Exemption

Assets acquired before 20 September 1985 currently sit outside the CGT system.

Under the new rules:

• Pre-CGT status is removed from 1 July 2027 onward
• Future gains will become taxable from that date forward
• Market valuations may be required to establish new cost bases

4. Negative Gearing Restricted to New Builds

Negative gearing remains, but becomes more targeted.

From 1 July 2027:

• Established residential properties purchased after the cutoff lose eligibility
• Only newly built residential properties can be negatively geared
• Losses from restricted properties are quarantined (not immediately deductible)

How quarantining works

Instead of offsetting salary income, losses:

• Accumulate in a ” loss bank”
• Can be used in future years against rental profits or gains

5. New Individual Tax Relief Measures

To balance broader reforms, two personal tax offsets are introduced:

Working Australians Tax Offset (WATO)

• $250 non-refundable offset
• Applies to eligible working individuals above the tax-free threshold

$1,000 Standard Work Deduction

• Flat deduction for work-related expenses
• No receipts required
• Optional (taxpayers can still claim actual expenses if higher)

What Happens to Small Businesses?

Despite wider reform, small business CGT concessions remain unchanged.

Eligible businesses may still access:

• 15-year exemption
• 50% active asset reduction
• Retirement exemption (up to $500,000)
• Small business rollover relief

Eligibility thresholds remain:

• Turnover under $2M OR
• Net assets under $6M (excluding home and super)

These concessions continue to be a major tax planning tool for business owners exiting or restructuring.

What Should Investors and Business Owners Do Now?

1. Reassess Asset Timing

Asset acquisition timing becomes critical due to the 2027 cutoff rules.

2. Review Structure Strategy

Different structures (individual, trust, company) will now have different tax outcomes under indexation rules.

3. Secure Asset Valuations

Long-held or legacy assets may require updated independent valuations before transition rules apply.

4. Recalculate Property Cash Flow

Negative gearing benefits will no longer apply universally to future property purchases.

5. Review Exit Planning Early

Business and property exits should be modelled under both old and new CGT frameworks.

Common Mistakes to Avoid

• Assuming current tax rules will remain unchanged for future investments
• Selling assets prematurely due to reform fear
• Ignoring valuation requirements for legacy assets
• Treating all structures as tax-equivalent
• Failing to model post-2027 cash flow scenarios

Frequently Asked Questions

Is negative gearing being abolished?

No. It is being restricted to certain future residential property purchases only.

Do existing properties change?

No. Existing investments are generally grandfathered under current rules.

Will I still get CGT discounts?

Only for assets acquired before the implementation cutoff.

What replaces the CGT discount?

CPI-based indexation of the cost base for future assets.

Do companies get indexation?

No. Indexation applies only to individuals and eligible trusts.

Final Thoughts

This reform represents a structural shift in how Australia treats investment growth, not just a tax adjustment.

The key change is simple:

Wealth planning will move from “discount-based strategies” to structure- and timing-based strategies.

For investors and business owners, the focus will increasingly shift toward:

• Entry timing
• Entity structuring
• Cash flow modelling
• Long-term tax positioning

Need Help Structuring Your Tax Position?

At Latitude Accountants, we help investors and business owners make sense of major tax changes and translate them into clear, practical strategies that protect and grow wealth in the real world. 

Our team works closely with clients to provide tailored support across property and investment structuring, capital gains tax (CGT) planning and modelling, business exit strategy planning, and tax-effective wealth structuring designed to improve long-term financial outcomes and reduce unnecessary tax exposure.

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Disclaimer

This article is general information only and does not constitute financial, taxation, or legal advice. You should seek advice from a qualified professional before making financial decisions.